Infosys seeing slower momentum for new projects

Bangalore: Infosys Technologies Ltd, India’s no. 2 software services exporter, is seeing a slowdown in getting new outsourcing contracts but has had no large-scale cancellations, its finance head said on Thursday.

“People are very selective in their spending,” chief financial officer V. Balakrishnan told Reuters. Companies are trying to do what is critical for them and putting off other work, he said.

Nasdaq-listed Infosys, which gets most of its revenue from the United States, is looking for acquisitions in Germany, France and Japan to boost growth that has slowed sharply in the last few quarters due to the global economic turmoil.

“New project momentum has come down,” Balakrishnan said, adding the company had not seen “large-scale” cancellations despite the tough business environment.

India’s large pool of English-speaking engineers and cheaper wages have helped attract outsourcing from Western firms such as Citigroup, General Electric, Qantas and Airbus.

But a recession in the United States, which accounts for more than half the sector’s revenue, and turmoil in the global financial sector have halted the sector’s scorching pace of growth and battered stocks.

Balakrishnan said a weaker rupee, which has fallen about 5.5% this year after dropping 19.1% in 2008, will give some buffer to the company’s profit margin in the current financial year that ends on 31 March.

The pricing environment was tough but Infosys was trying to mitigate its impact on earnings by moving more jobs to low-cost centres in India and improving the productivity of its employees, he said. “In some long-term relationships, we would have compromised on the prices because we have to reduce the pain points and make it work for the long term,” he said, referring to the pressure on its clients to cut costs.

Last week, firm’s chief executive Kris Gopalakrishnan said Infosys expected slow IT services business for the foreseeable future as the global economic slump forced clients to delay technology spending, and that the firm was taking cost-control measures.

Shares in Infosys, whose market value has fallen about 20% to Rs680 billion ($13 billion), were trading down 0.9% at Rs1,187.75 by late afternoon on the BSE index that was down 2.7%.